Baking System around the World
We can classify banks in various ways. Classification can be done on the basis of ownership, quality of activities and operation of activities. According to activities, banks can be classified as central bank, commercial bank, Co-operative bank, exchange bank, investment bank, savings bank, mortgage bank, transportation bank and bank for micro-industry and the like.
In the prevailing world, commercial bank management systems are more of less similar in principle. Dissimilarities exist in the scope of commercial banking activities in different countries; communist countries’ commercial baking systems are completely different. Capitalist countries differ in respect of the free market economic banking activities. From this perspective, we can divide the major commercial banking systems in different countries in the following groups:
1) Anglo-American Banking System
2) German Universal Banking System
3) Japanese Main Banking System
4) Indian Lead Banking System
These are briefly introduced below:
1) Anglo-American Banking System: This system is prevalent in most of the countries in the world along with Bangladesh. There are differences between commercial banking and investment banking. Commercial banks cannot operate investment banking activities. Separate investment banks or merchant banks are established in these countries for the operation of investment banking activities. Besides, this system does not allow the transactions of shares of securities for different accounts of the clients. However, this practice is not applicable for Bangladeshi banks. Commercial banks cannot be the owner or director of other corporate houses by purchasing sufficient shares. This is the relationship between commercial banks and corporate houses will be creditor and client relationship: not the owner relationship.
2) German Universal Banking System: This system is prevalent only in Germany. There is no difference between commercial banking and investment banking in this system. Commercial bank can operate any type of business activities. Commercial banks can buy up to 40% shares of corporate firms and participate in the ownership of the firm. In this system, commercial bank can monitor any firm in two ways-firstly as creditor and secondly as owner/director. Commercial banks participate in determining financial policy along with investment. So, this type of commercial banking system is called universal banking system of relationship banking.
3) Japanese Main Banking System: This system is closely related to the relationship banking. In this system, there are differences between investment banking and commercial banking but commercial bank have no restriction to participate in the ownership of corporate firm. This is the hybrid form of the above two systems. That is, banks cannot participate in the investment banking activities. The bank can by 5% share of any companies and participate in the ownership. In this system. Banks can monitor the companies as owner and creditor. Banks can influence the formulation of financial and investment policies of these firms. Banks also can undertake the management responsibility temporarily in the time of financial crisis of these firms. That is, banks maintain long-term relationship with the client firms. Only one controller bank is present in main banking system. A company’s main bank is the bank that gives highest loan (10-20%) to that company and also becomes the principal shareholder (5%) of that company. Besides, all the banking transactions of the company are performed through this bank.
4) Indian Lead Banking System: This system was developed in India by the end of 1960. Every lead bank performs extra responsibilities with the existing commercial banking system. The purposes of this system are to increase the rate of savings, equitable allocation of financial resources on the basis of some criteria to various sectors of the economy and to increase efficiency in investment and production. This system divides the country’s geographical area in different segments and only on leader bank is selected for each area. That area’s each & every commercial bank and other operating financial institution’s loan activities are transacted according to the advice & guidelines of the lead bank.
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